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Individual technologies for health - the implications of distinguishing between the ability to produce health investments and the capacity to benefit from those investments

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Author Info

  • Bolin, Kristian

    ()
    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Liljas, Bengt

    (Astra Zeneca, R&D, Mölndal, Sweden)

  • Lindgren, Björn

    (Centre for Health Economics at the University of Gothenburg; Lund University; National Bureau of Economic Research, Cambridge MA, US)

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    Abstract

    People differ in their ability to produce health investments and in their capacity to benefit from such efforts. In this paper, we assume (1) that the individual’s health-investment production function exhibits diminishing returns to scale and (2) that the individual’s capacity to benefit from the investments is diminishing in the stock of health. Previous research has only shown the importance of the first assumption for the health-capital adjustment process. The simultaneous effects go well beyond those results, however. Thus, this paper provides an extended demand-for-health framework that distinguishes between individuals both by their capacities to benefit and by their abilities to produce,when transforming health efforts into health increments. The potential usefulness of this framework for health-policy purposes is demonstrated by solving a numerically specified version of the model, and computing individual welfare effects of medical-care goods changes.

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    File URL: https://gupea.ub.gu.se/handle/2077/35510
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    Bibliographic Info

    Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 587.

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    Length: 31 pages
    Date of creation: Mar 2014
    Date of revision:
    Handle: RePEc:hhs:gunwpe:0587

    Contact details of provider:
    Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
    Phone: 031-773 10 00
    Web page: http://www.handels.gu.se/econ/
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    Related research

    Keywords: investments in health; diminishing returns; capacity to benefit; human capital; Grossman model;

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    References

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    1. Dardanoni, Valentino & Wagstaff, Adam, 1990. "Uncertainty and the demand for medical care," Journal of Health Economics, Elsevier, vol. 9(1), pages 23-38, June.
    2. Liljas, Bengt, 1998. "The demand for health with uncertainty and insurance," Journal of Health Economics, Elsevier, vol. 17(2), pages 153-170, April.
    3. Galama, Titus & Kapteyn, Arie, 2011. "Grossman’s missing health threshold," Journal of Health Economics, Elsevier, vol. 30(5), pages 1044-1056.
    4. Dardanoni, Valentino & Wagstaff, Adam, 1987. "Uncertainty, inequalities in health and the demand for health," Journal of Health Economics, Elsevier, vol. 6(4), pages 283-290, December.
    5. Bolin, Kristian & Jacobson, Lena & Lindgren, Bjorn, 2002. "Employer investments in employee health: Implications for the family as health producer," Journal of Health Economics, Elsevier, vol. 21(4), pages 563-583, July.
    6. Kenkel, D.S., 1988. "Health Behavior, Health Knowledge, And Schooling," Papers 10-88-3, Pennsylvania State - Department of Economics.
    7. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, December.
    8. Liljas, Bengt, 2000. "Insurance and imperfect financial markets in Grossman's demand for health model -- a reply to Tabata and Ohkusa," Journal of Health Economics, Elsevier, vol. 19(5), pages 821-827, September.
    9. Caputo,Michael R., 2005. "Foundations of Dynamic Economic Analysis," Cambridge Books, Cambridge University Press, number 9780521603683, October.
    10. Michael Grossman, 1972. "The Demand for Health: A Theoretical and Empirical Investigation," NBER Books, National Bureau of Economic Research, Inc, number gros72-1.
    11. Titus Galama, 2011. "A Contribution to Health Capital Theory," Working Papers 831, RAND Corporation Publications Department.
    12. Chang, Fwu-Ranq, 1996. "Uncertainty and investment in health," Journal of Health Economics, Elsevier, vol. 15(3), pages 369-376, June.
    13. Titus J. Galama & Patrick Hullegie & Erik Meijer & Sarah Outcault, 2012. "Is There Empirical Evidence For Decreasing Returns To Scale In A Health Capital Model?," Health Economics, John Wiley & Sons, Ltd., vol. 21(9), pages 1080-1100, 09.
    14. Muurinen, Jaana-Marja, 1982. "Demand for health: A generalised Grossman model," Journal of Health Economics, Elsevier, vol. 1(1), pages 5-28, May.
    15. Ried, Walter, 1998. "Comparative dynamic analysis of the full Grossman model," Journal of Health Economics, Elsevier, vol. 17(4), pages 383-425, August.
    16. Wagstaff, Adam, 1986. "The demand for health : Some new empirical evidence," Journal of Health Economics, Elsevier, vol. 5(3), pages 195-233, September.
    17. Kristian Bolin & Bjorn Lindgren, 2012. "The Double Facetted Nature of Health Investments - Implications for Equilibrium and Stability in a Demand-for-Health Framework," NBER Working Papers 17789, National Bureau of Economic Research, Inc.
    18. Selden, Thomas M., 1993. "Uncertainty and health care spending by the poor: The health capital model revisited," Journal of Health Economics, Elsevier, vol. 12(1), pages 109-115, April.
    19. Forster, Martin, 2001. "The meaning of death: some simulations of a model of healthy and unhealthy consumption," Journal of Health Economics, Elsevier, vol. 20(4), pages 613-638, July.
    20. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
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